8-K
ESPORTS ENTERTAINMENT GROUP, INC. (GMBL)
UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
Washington,DC 20549
FORM8-K
CURRENTREPORT
PURSUANTTO SECTION 13 OR 15(d) OF THE
SECURITIESEXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 15, 2021
ESPORTSENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 001-39262 | 26-3062752 |
|---|---|---|
| (State<br> or other jurisdiction of<br><br> <br>incorporation<br> or organization) | (Commission<br><br> <br>File<br> Number) | (IRS<br> Employer<br><br> <br>Identification<br> No.) |
BLOCK6,
TRIQPACEVILLE,
ST.JULIANS STJ 3109
MALTA
(Address of principal executive offices)
3562713 1276
(Registrant’s telephone number, including area code)
NotApplicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common<br> Stock | GMBL | The<br> Nasdaq Stock Market LLC |
| Common<br> Stock Purchase Warrants | GMBLW | The<br> Nasdaq Stock Market LLC |
| 10.0%<br> Series A Cumulative Redeemable Convertible Preferred Stock | GMBLP | The<br> Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item2.02 Results of Operations and Financial Condition.
LetterAgreement
On November 15, 2021, Esports Entertainment Group, Inc. (the “Company”) issued a press release announcing the Company’s financial and operating results for the quarter ended September 30, 2021. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein by reference.
The information in Item 2.02 and Item 9.01, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
Item9.01 Financial Statements and Exhibits.
| Exhibit<br><br> <br>Number | Exhibit Description |
|---|---|
| 99.1 | Press Release, dated November 15, 2021 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 15, 2021
| ESPORTS ENTERTAINMENT GROUP, INC. | |
|---|---|
| By: | /s/ Grant Johnson |
| Name: | Grant<br> Johnson |
| Title: | Chief<br> Executive Officer |
Exhibit99.1
EsportsEntertainment Group First Quarter
RevenueRises 86% Q/Q to $16.4 Million
Year-over-Yearand Quarterly Sequential Growth Continues
ReaffirmsFiscal 2022 Revenue Guidance of Over $100 Million
Hoboken,New Jersey – November xx, 2021 (GLOBE NEWSWIRE): Esports Entertainment Group, Inc. (NasdaqCM: GMBL, GMBLW) (or the “Company”) today announced financial results for its fiscal 2022 first quarter ended September 30, 2021.
FiscalFirst Quarter 2022 Financial Results
| ● | Net<br> revenue of $16.4 million, up $16.2 million compared to 1Q21 and an 86% increase compared to net revenue of $8.8 million in 4Q21 |
|---|---|
| ● | Gross<br> profit of $10.0 million, up $10.2 million compared to 1Q21 and a 92% increase compared to $5.2 million in 4Q21 |
| ● | Gross<br> margin of 61%, compared to 59% in 4Q21 |
| ● | GAAP<br> Net loss of $0.5 million, or $0.03 per share, compared to net loss of $1.8 million, or $0.15 per share in 1Q21, and net loss of $4.8<br> million, or $0.28 per share, in 4Q21 |
| ● | Non-GAAP<br> adjusted EBITDA* of ($2.7 million), compared to adjusted EBITDA of ($2.6 million) in 1Q21 and adjusted EBITDA of ($5.5 million) in<br> 4Q21 |
| ● | As<br> of September 30, 2021, the Company had total cash and cash equivalents of $0.9 million |
| ○ | Subsequent<br> to the end of the quarter, the Company raised $8.0 million in gross proceeds via a preferred stock offering |
| --- | --- |
| *<br> Reconciliation on non-GAAP financial measures provided in the tables of this press release. | |
| --- |
FirstQuarter 2022 and Recent Operational Highlights
| ● | Completed<br> acquisition of BetHard, the B2C business of Gameday Group, which brought the Company gaming licenses in Sweden and Spain |
|---|---|
| ● | Submitted<br> transactional waiver to the New Jersey Division of Gaming enforcement, which, pending final approval, would allow the Company to<br> begin in-state betting operations |
| ● | Completed<br> $8.0 million private placement of convertible notes with $17.50 conversion price |
| ● | Expanded<br> roster of professional sports team partnerships with new agreements with the Indianapolis Colts, Tampa Bay Buccaneers and Los Angeles<br> Chargers |
| ● | Launched<br> fan-centered EGL ClubClash program with professional sports teams |
| ● | Partnered<br> with Hall of Fame Resort and Entertainment Company to become the official esports provider for the Hall of Fame Village powered by<br> Johnson Controls |
| ● | Entered<br> into agreement to launch state-of-the-art Helix eSports gaming facility at UCLA |
| ● | Established<br> content partnership with ESTV EsportsTV, the world’s first 24-7 live linear video channel dedicated to esports |
| ● | Partnered<br> with NetEase to become official North American tournament and broadcast provider of Naraka: Bladepoint |
| --- | --- |
ManagementCommentary
“Our first quarter revenue nearly matched our performance for the entirety of FY21 and reflects our recent platform building transactions. With the strong start to FY22 and continued momentum in our business, we are reiterating our expectation that Esports Entertainment will eclipse more than $100 million in revenue this fiscal year,” said Grant Johnson, CEO of Esports Entertainment Group. “The powerful combination of marquee partnerships, expansive portfolio of products and services and strategic acquisitions is expected to drive double digit year-over-year and quarterly sequential financial growth throughout fiscal 2022. We remain ideally positioned in iGaming and e-sports, two of the fastest growing entertainment verticals, and our team is focused on executing our rapid expansion strategy, which we expect will further strengthen our market position and allow us to scale and achieve operating leverage from our portfolio of unique and powerful assets.”
Fiscal2022 Financial Outlook
The Company expects net revenue growth of at least 490% to $100 million in FY22, driven primarily by the platform-building and strategic diversification acquisitions completed in calendar 2021.
ConferenceCall
Esports Entertainment Group will host a conference call and webcast today, Monday, November 15, at 5:00 p.m. ET to answer questions about the Company’s operational and financial highlights for its fiscal 2022 first quarter as well as other recent developments.
| Date: | Monday,<br> November 15, 2021 |
|---|---|
| Time: | 5:00 p.m.<br> Eastern Time |
| Live Call: | +1-866-269-4260<br> (U.S. Toll-Free) or +1-323-289-6576 (International) |
| Webcast: | https://viavid.webcasts.com/starthere.jsp?ei=1513062&tp_key=33147e4e48 |
For interested individuals unable to join the conference call, a dial-in replay of the call will be available until November 29 and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 8268937.
AboutEsports Entertainment Group
Esports Entertainment Group is a full stack esports and online gambling company fueled by the growth of video-gaming and the ascendance of esports with new generations. Our mission is to help connect the world at large with the future of sports entertainment in unique and enriching ways that bring fans and gamers together. Esports Entertainment Group and its affiliates are well-poised to help fans and players to stay connected and involved with their favorite esports. From traditional sports partnerships with professional NFL/NHL/NBA/FIFA teams, community-focused tournaments in a wide range of esports, and boots-on-the-ground LAN cafes, EEG has influence over the full-spectrum of esports and gaming at all levels. The Company maintains offices in New Jersey, the UK and Malta. For more information visit www.esportsentertainmentgroup.com.
FORWARD-LOOKINGSTATEMENTS
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.
Contact:
US Investor Relations
JCIR
Joseph Jaffoni, James Leahy, Norberto Aja
212-835-8500
gmbl@jcir.com
RedChip Companies, Inc.
Dave Gentry
407-491-4498
dave@redchip.com
MediaInquiries
brandon.apter@esportsentertainmentgroup.com
InvestorRelations Inquiries
Jeff@esportsentertainmentgroup.com
EsportsEntertainment Group, Inc.
ConsolidatedBalance Sheets
| June 30, 2021 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets | |||||
| Cash | 926,983 | $ | 19,917,196 | ||
| Restricted cash | 2,945,654 | 3,443,172 | |||
| Accounts receivable, net | 377,673 | 136,681 | |||
| Receivables reserved for users | 5,061,768 | 2,290,105 | |||
| Other receivables | 803,704 | 658,745 | |||
| Prepaid expenses and other current assets | 2,922,104 | 3,264,344 | |||
| Total current assets | 13,037,886 | 29,710,243 | |||
| Equipment, net | 789,637 | 726,942 | |||
| Operating lease right-of-use asset | 1,168,635 | 1,272,920 | |||
| Intangible assets, net | 59,030,190 | 45,772,555 | |||
| Goodwill | 52,328,021 | 40,937,370 | |||
| Other non-current assets | 2,441,080 | 1,315,009 | |||
| TOTAL ASSETS | 128,795,449 | $ | 119,735,039 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities | |||||
| Accounts payable and accrued expenses | 11,599,709 | $ | 8,458,689 | ||
| Payable for Bethard acqusition | 4,629,388 | - | |||
| Liabilities to customers | 6,116,869 | 3,057,942 | |||
| Deferred revenue | 151,045 | 22,110 | |||
| Current portion of notes payable and other long-term debt | 219,024 | 223,217 | |||
| Operating lease liability - current | 375,628 | 414,215 | |||
| Contingent consideration - current | 3,266,000 | - | |||
| Total current liabilities | 26,357,662 | 12,176,173 | |||
| Senior convertible note, net of unamortized discount | 7,941,998 | 6,302,504 | |||
| Notes payable and other long-term debt | 165,599 | 221,300 | |||
| Warrant liability | 11,691,400 | 23,500,000 | |||
| Deferred income taxes | 5,503,861 | 1,870,861 | |||
| Operating lease liability - non-current | 820,082 | 878,809 | |||
| Contingent consideration - non-current | 2,583,480 | - | |||
| Total liabilities | 55,064,083 | 44,949,647 | |||
| Stockholders’ equity | |||||
| Preferred stock 0.001 par value; 10,000,000 shares authorized, none issued and outstanding | - | - | |||
| Common stock 0.001 par value; 500,000,000 shares authorized, 21,983,172 and 21,896,145 shares issued and outstanding as of<br> September 30, 2021 and June 30, 2021, respectively | 21,983 | 21,896 | |||
| Additional paid-in capital | 123,264,256 | 122,341,002 | |||
| Accumulated deficit | (47,460,717 | ) | (46,908,336 | ) | |
| Accumulated other comprehensive loss | (2,094,156 | ) | (669,170 | ) | |
| Total stockholders’ equity | 73,731,366 | 74,785,392 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 128,795,449 | $ | 119,735,039 |
All values are in US Dollars.
EsportsEntertainment Group, Inc.
ConsolidatedStatements of Operations
| Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Net revenue | $ | 16,408,291 | $ | 222,392 | ||
| Operating costs and expenses: | ||||||
| Cost of revenue | 6,451,292 | 420,075 | ||||
| Sales and marketing | 7,386,463 | 604,118 | ||||
| General and administrative | 11,175,136 | 3,055,808 | ||||
| Total operating expenses | 25,012,891 | 4,080,001 | ||||
| Operating loss | 8,604,600 | 3,857,609 | ||||
| Other income (expense): | ||||||
| Interest expense | (2,345,196 | ) | (1 | ) | ||
| Change in fair value of warrant liability | 11,808,600 | 2,100,953 | ||||
| Other non-operating loss | (1,411,185 | ) | (51,836 | ) | ||
| Total other income | 8,052,219 | 2,049,116 | ||||
| Loss before income taxes | 552,381 | 1,808,493 | ||||
| Income tax benefit (expense) | - | - | ||||
| Net loss | $ | 552,381 | $ | 1,808,493 | ||
| Basic and diluted loss per common share | $ | (0.03 | ) | $ | (0.15 | ) |
| Weighted average number of common shares outstanding, basic and diluted | 21,954,892 | 12,173,038 |
AdjustedEBITDA
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:
EsportsEntertainment Group, Inc.
AdjustedEBITDA
| Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Net income (loss) | $ | (552,381 | ) | $ | (1,808,493 | ) |
| Adjusted for: | ||||||
| Interest | 2,345,196 | 1 | ||||
| Income tax | - | - | ||||
| Depreciation and amortization | 3,342,352 | 266,448 | ||||
| Shared based compensation | 882,372 | 1,007,672 | ||||
| Amortization of debt discount | 1,639,494 | - | ||||
| Transaction related expenses | 63,000 | - | ||||
| Other non-operating cost | 1,411,185 | 51,836 | ||||
| Change in fair value of warrant liability | (11,808,600 | ) | (2,100,953 | ) | ||
| Total adjusted EBITDA (loss) | $ | (2,677,382 | ) | $ | (2,583,489 | ) |
Non-GAAPFinancial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (GAAP), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses this non-GAAP financial measure for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that it provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measure used by the Company in this press release may be different from the methods used by other companies.
We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense, income tax expense or benefit, depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, non-core litigation, settlement and related costs, remeasurement of warrant liabilities, and certain other non-recurring, non-cash or non-core items, as described in the reconciliation below.
Adjusted EBITDA excludes certain expenses that are required in accordance with U.S. GAAP because they are non-recurring items (for example, in the case of transaction-related costs), non-cash expenditures (for example, in the case of depreciation, amortization, and stock-based compensation), or are not related to our underlying business performance (for example, in the case of interest income and expense and litigation settlement and related costs).